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The US dollar is suffering technical setbacks against the Canadian dollar, due rising oil prices and failure in the US dollar index to stage a definitive breakout to fresh monthly highs.
Last week the USDCAD pair traded in a wide range between the 1.2600 and 1.2800 level, with rallies very much being sold and towards the top of range as downside momentum gained traction.
In order for the USDCAD pair to rally bulls need to see oil prices declining back towards $70.00 or indeed a breakdown to the upside in the US dollar. If we see both then it could be a potent combination.
Should we see this fail to materialize then we are likely to see the USDCAD pair extending the lower trading range towards the 1.2500 price area, and the pair settling in between 1.2500 and 1.2600.
It should be noted that political uncertainty coming from Kazakhstan has been a big driver of oil prices. The country is a major oil producer, so news coming from this country will impact crude.
To the upside, we almost certainly need to see a number of daily price closes above the technically important 1.2840 resistance zone, which has been a great trading pivot since 2020.
For now, traders are focused on the release of CPI inflation and Retail Sales data from the United States economy, and also the latest news surrounding oil prices and of course Omicron.
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High levels of bullish sentiment are still being seen towards the USDCAD pair, with some 71 percent of traders holding a positive view towards the USDCAD pair.
This bullish sentiment bias is a worry, and it could mean that USDCAD traders are in for a tough week unless we see the mentioned technical close back above the 1.2840 level.
USDCAD Short-Term Technical Analysis
The Ichimoku indicator on the four-hour time frame shows that the USDCAD pair has fallen under the bottom of the cloud, which could indicator more short-term losses ahead.
The chances of a strong sell-off are possible, as the Lagging Line (Dark Green) trades under the Ichimoku cloud. This means that the four-hour time frame has a number of strong sell signals.
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USDCAD Medium-Term Technical Analysis
The USDCAD pair looks still very bullish on the daily time frame, with the price trading above the Ichimoku cloud, and the Lagging Line still generating a strong medium-term buy signal.
A large, inverted head and shoulders pattern has also formed, which continues to foreshadow more gains in the USDCAD pair. The lower time frame sell signal could be a trap.
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